New Orleans Utility Struggles To Relight a City of Darkness

By GARY RIVLIN

Published: November 19, 2005

From his temporary headquarters on the top floor of the Hyatt Regency here, Daniel F. Packer, the chief executive of Entergy New Orleans, has a perfect vantage point for viewing the problem confronting his beleaguered utility company: lights twinkling in dozens of neighborhoods, but darkness spread across 40 percent of the city.

Those vast stretches of New Orleans without access to electrical power represent the magnitude of work the utility must perform before the city can recover. Nearly three months after Hurricane Katrina, the afflicted areas include not only devastated sections of town like the Lower Ninth Ward but also neighborhoods that suffered relatively little water and wind damage.

To be sure, it is not just a lack of electrical power that is hindering the city's revival. Almost half of New Orleans lacks natural gas for cooking or heating, according to Entergy, even as temperatures here have fallen sharply in recent days, dipping below 40 degrees at night. Toilets in roughly half the homes are still not connected to the city's sewer system, municipal officials say. About a quarter of the city is still without drinkable water, they say, and some isolated patches have no running water at all, a circumstance that could prove disastrous in the event of a fire.

Still, no other ingredient is quite so critical to the recovery as power. And even in areas where the electricity or gas is back on, some customers have to wait for a city inspector's approval before getting it. The city requires such approval of any home or workplace that suffered wind or water damage from the storm, and several members of the City Council acknowledged that an inspector's arrival could take weeks.

''We're trying to get the city up and running so we have a viable tax base,'' Councilwoman Cynthia Hedge-Morrell told Entergy officials this week at a meeting of the Council's Utilities Committee.

Under pressure from the Council and residents, Entergy has developed a plan to be providing electricity to at least 80 percent of customers by year's end, and gas services to 80 percent by mid-January.

But the company declines to attach a target date to the restoration of power in areas ''too devastated to even make a reliable prediction,'' Mr. Packer said. That includes parts of the Lower Ninth Ward and New Orleans East, two predominantly black areas of the city, and Lakeview, a largely white middle-class community.

In the period immediately after the hurricane, Entergy encountered the ordinary post-storm headaches, like downed power lines and fallen utility poles, and also the extraordinary, including the severe damage that was done to substations when floodwaters covered much of the city. More than half of the utility's 42 substations in the metropolitan area were flooded, Mr. Packer said, along with two of its power plants.

So in the first weeks after the storm, Entergy brought in scores of extra workers to help repair its crippled system and, Mr. Packer said, was soon ''ahead of the game.'' Then, on Sept. 23, the company filed for bankruptcy protection, and at that point terminated all its contracts for outside workers.

Entergy had had ''all this power available to people living in certain areas,'' but, with much of the city deserted, ''there wasn't anyone here to take it,'' Mr. Packer said. And because of all the work, ''we were burning cash at a time we couldn't afford to.''

The utility's repair crew of roughly 200 workers, about evenly divided between electric and gas repairs, also had to contend with the damage the storm had inflicted on the maze of gas pipes that crisscross the city. The water that rushed into those pipes has been one large obstacle confronting Entergy workers as they labor to return gas service; pipes that cracked when buffeted by the floodwaters have been another.

The estimated cost of repairs to the utility's infrastructure is $260 million to $325 million, Mr. Packer said. Insurance will cover a part of that loss, but it remains unclear how much -- or how the company will pay for the rest as it struggles to replace lost revenue.

''They're suffering from this double whammy,'' said Clinton A. Vince, a lawyer with Sullivan & Worcester in Washington who works as a consultant to the City Council's Utilities Committee. ''They have these enormous recovery costs, but they don't have the customer base to cover it.''

That base has been made all the smaller because many of the customers who would now be receiving power simply have not returned to New Orleans. Only about 30 percent of Entergy's electricity customers are now drawing power. For gas customers, the figure is less than 20 percent.

''To be without 70 percent of your electricity and gas customers more than 80 days after a storm is an unprecedented occurrence in the utility industry,'' said Curt H?rt, an executive vice president with Entergy New Orleans's parent, the Entergy Corporation, the country's fifth-largest power company.

The Entergy Corporation posted $350 million in profits in the three months ended Sept. 30, a 24 percent increase over the corresponding period last year. But company officials say regulators prohibit them from using money from any of its four other utilities to bail out the fifth. Entergy has granted its New Orleans subsidiary a $200 million line of credit, but the loan must be repaid.

Mr. Packer, the Entergy New Orleans chief executive, has made at least three trips to Washington, one this week, to meet with White House officials and members of Congress. He is in search of a $450 million bailout, for infrastructure repair and the expected amount of revenue loss, that is similar to the relief package requested by the New York power provider Consolidated Edison after the Sept. 11 attacks. (Con Ed asked Washington for $350 million and has so far received $93 million.) Mr. Packer's pleas, and those of the City Council members who have joined him, have elicited sympathy but as yet no dollars.

Without federal relief, Mr. Packer and others say, the utility may have to raise its rates 140 percent.

''We're not asking for anything different from what the folks in Manhattan got after the tragedy of 9/11,'' Mr. H?rt said.

Mr. Packer also warned that if relief did not come soon, the city might have no choice but to take over the company. That might seem good news for consumers, he said, but the utility would no longer have the buying power it enjoys in the energy market as part of a large conglomerate .

Several weeks ago, Entergy announced that large parts of the city would not have electrical service until mid-2006. The resulting roar of complaints spurred the company to shift strategy. On Thursday, the City Council approved an Entergy plan to use $11.2 million that had been earmarked for other purposes, including $6.8 million in a fund devoted to improving customers' energy efficiency. The extra money will allow the company to more than double the size of its repair crews.

Photos: Daniel F. Packer, chief executive of Entergy New Orleans, outside his temporary headquarters. His company is pleading for a federal bailout.; Downtown New Orleans, like some other areas of the city, offers a panorama of twinkling lights. But fully 40 percent of New Orleans remains in darkness, and much of it is without natural gas as well.; Entergy New Orleans repair crews like this one have been working to restore a devastated power infrastructure. The estimated cost of the damage is as much as $325 million. (Photographs by Michelle V. Agins/The New York Times)(pg. A13); Among the vast stretches of New Orleans still without full access to electrical power is this one just south of the convention center. (Photo by Michelle V. Agins/The New York Times)(pg. A1)